HIGHLIGHTS
- Treasuries partially unwound Monday's risk-off support tied to China's DeepSeek AI startup's disruption to US AI developers.
- Focus on Wednesday's FOMC policy announcement, widely expected to remain steady despite Pres Trump's call for lower rates.
- Stocks recovered a fair portion of Monday's sell-off while USD marched higher.
MNI US TSYS: Broader Market Recovery Ahead Wednesday's FOMC Announcement
- Treasury look to finish weaker, unwinding a portion of Monday's risk-off rally tied to China's AI startup DeepSeek. Broader markets also likely recovered as accounts squared positions/covered risk ahead of Wednesday's FOMC policy announcement.
- Treasuries pared losses slightly after lower than expected Durable Goods Orders and down-revision to prior, while Capital Goods were higher than expected. December's advance durable goods report was solid overall, despite a large miss in the headline orders figure (-2.2% M/M vs +0.6% expected, prior rev -2.0% from -1.2%).
- The Conference Board consumer survey saw confidence disappoint in January at 104.1 (cons 105.9) after an upward revised 109.5 (initial 104.7) for its lowest since September. Declines were seen in both main categories, also to their lowest since September, but were most pronounced for the present situation.
- Currently, the Mar'25 10Y contract trades -3 at 109-02, off late overnight low of 108-25.5. Futures remain inside technical ranges: support well below at 108-00/107-06 (Low Jan 16 / 13 and the bear trigger), nearly breached yesterday - resistance above at 109-12+ (50-day EMA).
- Stocks also rebounded, semiconductors outperforming software & hardware makers as markets had more time to contemplate the new competition for US AI developers. Currently, the DJIA trades up 123.63 points (0.28%) at 44836.52, S&P E-Minis up 54.5 points (0.9%) at 6101.5, Nasdaq up 409.7 points (2.1%) at 19753.18.
- Cross-asset moves: Overall, G10 FX markets traded in a more stable manner following Monday's sharp volatility, Bloomberg US$ index gained 3.52 at 1300.32. Gold +22.34 at 2763.15; WTI crude (+.71 at 73.88) likely supported by comments from the White House Press Secretary that the Feb 1 deadline for applying tariffs on Mexico and Canada still stands.
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00268 to 4.31032 (-0.00509/wk)
- 3M -0.00698 to 4.28689 (-0.01295/wk)
- 6M -0.01660 to 4.22963 (-0.02943/wk)
- 12M -0.04071 to 4.13904 (-0.05976/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.34% (+0.00), volume: $2.338T
- Broad General Collateral Rate (BGCR): 4.32% (-0.01), volume: $899B
- Tri-Party General Collateral Rate (TGCR): 4.32% (-0.01), volume: $868B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $97B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $276B
FED Reverse Repo Operation
RRP usage rebounds to $112.760B this afternoon after falling to $92.863B yesterday - the lowest level since mid-April 2021. The number of counterparties rises to 28 from 26 prior.
US SOFR/TREASURY OPTION SUMMARY
SOFR option flow turned mixed in the second half while Treasury options continued to rotate around llow delta put structures in the lead up to Wednesday's FOMC policy annc. Underlying futures continue to gradually unwind Monday's DeepSeek inspire risk-off support. In turn, projected rate cuts through mid-2025 have eased vs. late Monday (*) levels as follows: Jan'25 at -0.1bp (-0.7bp), Mar'25 at -7.8bp (-8.3bp), May'25 at -15.4bp (-15.9bp), Jun'25 at -26.5bp (-27.9bp), Jul'25 at -32.1bp (-33.7bp).
SOFR Options:
+2,500 0QJ5 96.25/96.50 2x3 call spds vs. 5,000 0QJ5 95.37 puts, 2.0 net
+2,000 SFRZ5 95.25 puts, 6.5
3,200 SFRM5 98.75/99.75 1x2 call spds ref 95.94
+10,000 SFRZ5 95.37/95.50 put spds 2.0 vs. 96.09/0.04%
Block, 5,000 SFRN5 95.87/96.00/96.12 call flys, 1.5 ref 96.05
2,500 SFRH5 95.68/95.75 2x1 put spds ref 95.775
6,000 SFRH5 95.62/95.68 put spds ref 95.775
Block/screen, -3,500 SFRZ5 95.62/96.12 2x1 put spds, 10.0 ref 96.10
2,000 SFRJ5 96.00/96.06/96.12 call flys ref 95.935
1,000 0QM5/0QZ5 96.25/96.50/96.75 call fly spd
+3,900 SFRH5 95.87/96.00 call spds, 2.0 ref 95.78
Treasury Options:
1,000 USJ5 114/118 2x3 call spds ref 113-23
+6,000 TUJ5 102 puts, 1.5
+10,000 TYH5 108 puts, 23
over 13,000 TYJ5 108 puts, 44 last ref 108-25 to -28.5
2,000 TYH5 112/115 call spds, 3 ref 108-27.5
-4,475 FVH5 105.5/106.25 2x1 put spds, 7.0 vs. 106-16.75/0.05%
1,500 TYH5 107.5/109 2x1 put spds, 20 ref 108-29.5
+5,000 TYH5 106/107 put spds, 5 ref 108-29/0.08%
3,000 wk1 TY 107.75/108 put spds, 4 (exp 2/7) ref 108-29 to -27.5
1,250 TYH5 103/104.5/107 broken put flys ref 108-31
MNI BONDS: EGBs-GILTS CASH CLOSE: Bear Steeper Ahead Of Slew Of Cenbank Decisions
European curves bear steepened Tuesday, ahead of a heavy slate of central bank decisions.
- Core bonds performed well overnight, after further concerns over US tariffs emerged. But a risk-on tone returned to markets with equities rallying in European morning trade, ultimately applying pressure on both Bunds and Gilts.
- Implied ECB policy rates ticked slightly higher ahead of Thursday's decision, for which a 25bp cut remains nearly 100% priced (MNI's preview was out today, see here)
- The German belly outperformed its UK counterpart, but underperformed throughout most of the rest of the curve.
- Periphery/semi-core EGB spreads closed tighter. However, BTP spreads reversed most of the session's earlier tightening on news that Italy PM Meloni was under investigation in a case relating to the repatriation of a Libyan police officer.
- Wednesday's calendar includes a policy address by UK Chancellor Reeves and Spanish GDP, with attention on global central bank decisions (BOC, Riksbank, Federal Reserve) ahead of the ECB Thursday.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 2.3bps at 2.272%, 5-Yr is up 2.4bps at 2.365%, 10-Yr is up 3.4bps at 2.565%, and 30-Yr is up 2.9bps at 2.78%.
- UK: The 2-Yr yield is up 2.2bps at 4.31%, 5-Yr is up 2.7bps at 4.31%, 10-Yr is up 2.9bps at 4.614%, and 30-Yr is up 3.1bps at 5.174%.
- Italian BTP spread down 0.7bps at 109.5bps / French OAT down 1.9bps at 72.1bps
MNI OPTIONS: More Varied Rates Structures Remain Centered Around Upside
Tuesday's Europe rates/bond options flow included:
- DUJ5 107 calls, bought for 10.5 in +5k
- RXH5 131.50/130.50ps 1x2, bought the 1 for 1.5 in ~1.95k.
- ERM5 98.00/98.12/98.25/98.37c condor, bought for 1.25 in 8k.
- ERM5 98.00/98.25cs 1x2, bought for 0.75 in 4k.
- ERU5 97.625/97.50/97.375p fly 1x3x2, bought for -0.5 in +3k.
- SFIJ5/M5 95.95/96.05cs calendar spread, bought the June for 1 in 8k total.
- SFIG5 95.65/95.70/95.75c ladder 2x1x1, bought for 2.5 in 5k
MNI FOREX: Currency Markets Stabilise Ahead of CB Decisions, Greenback Recovers
- Overall, G10 FX markets have traded in a more stable manner on Tuesday following the sharp volatility exhibited during Monday’s session. Following a brief bout of greenback strength during APAC hours on tariff related headlines, currency ranges have since held contained ranges as major central bank decisions are awaited across Wednesday/Thursday.
- Both AUD and NZD are among the poorest performers, with AUDUSD extending its pullback this week to around 1.2% from last Friday’s close. Recent gains stalled at resistance around the 50-day EMA (intersecting at 0.6325), and the subsequent reversal lower suggests the possible end of the correction between Jan 13 - 24.
- Key quarterly inflation data from Australia is scheduled on Wednesday, that may prompt the RBA to consider rate cuts. Q4 CPI is expected to show a drop to 2.5% from 2.8% y/y prior. A continuation lower for AUDUSD would bring the focus back on 0.6131, the Jan 13 low and the bear trigger. On the upside, a clear breach of the 50-day average is required to signal scope for a stronger recovery.
- In similar vein, EUR and GBP have tracked around 0.5% lower on the session. Significantly, cable tested resistance at the 50-day EMA on Monday (intersecting today at 1.2520), and with this level holding, medium-term signals remain bearish for the pair. Fiscal matters remain in the spotlight this week with Chancellor of the Exchequer Rachel Reeves due to deliver a speech on Wednesday regarding how the government intends to boost economic growth.
- Headlining the central bank docket tomorrow will be the Fed decision, with the press conference seen key in determining the FOMC’s stance on policy easing through 2025. Elsewhere, the Riksbank and the Bank of Canada decisions are scheduled, ahead of the ECB on Thursday.
MNI FX OPTIONS: Expiries for Jan29 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0400(E918mln), $1.0420-30(E1.2bln), $1.0450(E668mln), $1.0500(E1.3bln)
- USD/JPY: Y154.00($627mln), Y154.75($700mln), Y155.00($1.4bln), Y156.00($544mln)
- USD/CAD: C$1.4500($1.1bln)
- USD/CNY: Cny7.2800($600mln)
MNI US STOCKS: Late Equities Roundup: Tech Stock Lead Strong Session Gains
- US Stock markets continue to unwind yesterday's sell-off tied to China's AI startup DeepSeek. New competition for US AI developers rattled global markets Monday, tech-heavy Nasdaq -3.65% as leading chip maker stocks tumbled as much as 25%. Currently, the DJIA trades up 123.63 points (0.28%) at 44836.52, S&P E-Minis up 54.5 points (0.9%) at 6101.5, Nasdaq up 409.7 points (2.1%) at 19753.18.
- Information Technology and Communication Services sectors continued to outperform in late trade, semiconductors outperforming software & hardware makers: Crowdstrike +8.98%, Nvidia +7.04% after falling over 18% on Monday, Palantir +5.82% and Salesforce +4.70%.
- Interactive media and entertainment shares helped support the Communication Services sector: Meta +2.97%, Live Nation +1.71% and Alphabet +1.63%.
- On the flipside, Utilities and Energy sectors underperformed in the first half, electricity providers and oil companies weaker with NextEra Energy -4.7%, Entergy -3.69%, Edison International -3.26%, Valero -2.59% while Diamondback Energy slipped -2.0%.
- Earnings update after the close: NextEra Energy, Starbucks, Qorvo and Stryker Corp. Followed by a heavy Wednesday schedule: Super Micro Computer, Corning, Danaher, Norfolk Southern, Flex, Brinker International, Lennox Int, Hess Corp, MSCI Inc, General Dynamics, Otis Worldwide, Stifel Financial, T-Mobile US, Nasdaq, IBM, Waste Management, Tesla, ServiceNow, Lam Research Corp, Meta Platforms, Microsoft, Ameriprise Financial, Wolfspeed, Western Digital, United Rentals, Teradyne, Las Vegas Sands Corp, Raymond James Financial, Whirlpool Corp and Dow Inc.
MNI EQUITY TECHS: E-MINI S&P: (H5) Support Holds For Now
- RES 4: 6200.00 Round number resistance
- RES 3: 6178.75 High Dec 6 and key resistance
- RES 2: 6163.75 High Dec 16
- RES 1: 6162.28 High Jan 24
- PRICE: 6101.50 @ 1455 ET Jan 28
- SUP 1: 5961.75/5948.00 Low Jan 16 / 27
- SUP 2: 5943.94 61.8% retracement of the Jan 13 - 24 bull leg
- SUP 3: 5892.37 76.4% retracement of the Aug 5 - Dec 6 bull leg
- SUP 4: 5809.00 Low Jan 13 and a key support
The S&P E-Minis contract initially traded lower Monday extending the pullback from last Friday’s high. Key short-term support to watch lies at 5961.75, the Jan 16 low (pierced). For now, the move down appears corrective, however, a clear breach of 5961.75 would strengthen a bearish threat and signal scope for a deeper retracement, towards 5943.94, a Fibonacci retracement. Key resistance is 6178.75, the Dec 6 high.
MNI COMMODITIES: WTI Rebounds, Gold Bull Phase Remains Intact
- WTI has jumped back into gains on the day, likely supported by comments from the White House Press Secretary that the Feb 1 deadline for applying tariffs on Mexico and Canada still stands.
- WTI Mar 25 is up by 1.0% at $73.9/bbl.
- Despite today’s gains, WTI futures remain below the 20-day EMA at $74.13, which was breached yesterday, turning attention to support around the 50-day EMA, at $72.22.
- On the upside, a continuation higher would focus attention on $79.48, the Apr 12 ‘24 high and a key resistance.
- Meanwhile, Henry Hub is extending its decline this week to the lowest levels since Jan 8, driven by a warm weather forecast for the southern US, which eases demand pressures after the cold weather last week.
- US Natgas Feb 25 is down by 7.0% at $3.44/mmbtu.
- Elsewhere, spot gold has risen by 0.9% to $2,764/oz, unwinding most of yesterday’s losses.
- The gain comes despite the rebound in the dollar today, as the yellow metal is buoyed by haven demand amid ongoing tariffs concerns.
- The move brings gold back toward its recent highs, with a bull cycle still in play.
- Sights are on $2,790.1, the Oct 31 all-time high. A break of this hurdle would confirm a resumption of the primary uptrend, opening the $2,800 handle.
WEDNESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 29/01/2025 | 0700/0800 | * |  DE | GFK Consumer Climate |
| 29/01/2025 | 0700/0800 | ** |  SE | Private Sector Production m/m |
| 29/01/2025 | 0700/0800 | SE | Flash Quarterly GDP Indicator | |
| 29/01/2025 | 0800/0900 | *** |  ES | GDP (p) |
| 29/01/2025 | 0830/0930 | *** | SE | Riksbank Interest Rate Decison |
| 29/01/2025 | 0900/1000 | ** |  EU | M3 |
| 29/01/2025 | 0900/1000 | ** |  IT | ISTAT Consumer Confidence |
| 29/01/2025 | 0900/1000 | ** | IT | ISTAT Business Confidence |
| 29/01/2025 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 29/01/2025 | 1330/0830 | ** | US | Advance Trade, Advance Business Inventories |
| 29/01/2025 | 1415/1415 |  GB | BOE's Bailey at Treasury Select Committee | |
| 29/01/2025 | 1445/0945 | *** |  CA | Bank of Canada Policy Decision |
| 29/01/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 29/01/2025 | 1900/1400 | *** | US | FOMC Statement |
| 30/01/2025 | - | EU | European Central Bank Meeting | |
| 30/01/2025 | 0030/1130 | ** |  AU | Trade price indexes |